Company Town

Producer Pleads Guilty to Tax Misdemeanor

Producer Peter Hoffman's criminal tax fraud case ended with a whimper Wednesday when the executive pleaded guilty to the misdemeanor federal charge of sending a false tax return to the Internal Revenue Service that understated his 1989 taxable income by about $33,000.

The plea, which includes no promise to cooperate with other federal tax investigations, ends a case in which Hoffman had originally faced four felony tax fraud charges. He was acquitted on two of those charges in October, with the jury deadlocked in his favor on the other two.

Hoffman's plea salvages at least a portion of the case for government prosecutors but is a far cry from the stiff prison term and fines that Hoffman potentially faced in the original indictment. It also fails to accomplish one of prosecutors' main goals: to enlist Hoffman as a cooperative witness in a tax fraud probe of producers Mario Kassar and Andy Vajna.

Hoffman was president of the now-defunct Carolco Pictures when Kassar and Vajna were partners in the company. Carolco, known for elaborate financing deals involving offshore companies, produced such hits as "Terminator 2: Judgment Day," "Basic Instinct" and "Total Recall" before filing for bankruptcy in 1995 and eventually folding.

In 1996, U.S. Tax Court documents revealed that the IRS is alleging that Kassar and Vajna owe the federal government a combined $109.7 million in back taxes and penalties.

Hoffman's plea involves a federal allegation that his return failed to include as income at least $62,790 in payments made by Carolco on his behalf for various items and services, which Hoffman, according to the government, believed offset business expense deductions of $30,000. All told, the government maintained, his taxable income was at least $33,098 higher than he reported.

The charge Hoffman pleaded guilty to carries a maximum penalty of one year in prison, but under federal guidelines he cannot get more than six months and could well get only a probationary sentence. Hoffman can be fined a maximum of about $5,000, according to those same guidelines. Hoffman has agreed to refile tax returns for 1989 and '90, paying any additional taxes owed.

"This is a misdemeanor plea that I think puts into perspective the realistic level of this offense. He is satisfied that this matter concludes the prosecution and allows him to continue with his life," said Brian J. Hennigan, one of Hoffman's lawyers.

Asked in court by U.S. District Judge John Davies if he was pleading guilty as an "escape hatch" from the proceedings, Hoffman replied, "Yes." In a statement, Hoffman cited the financial burden of the ongoing case as the principal reason for his plea.